Learning the Lingo Makes Home Buying Easier
When you are ready to enter the home buying arena, it can quickly become overwhelming and downright confusing. Possessing a basic knowledge of real estate terms and concepts gives you more confidence during the buying process.
One often misunderstood word in the real estate world is “contingency.” A contingency in a listing status or contract means that a particular condition must be met to proceed with the sale. Our real estate agents are here to guide you through the buying process, and we want you to know what this term means and how it could be a game changer. As you familiarize yourself with the different types of contingencies, you’ll see how they could potentially work to your advantage.
- Financial Contingency
A financial contingency is run-of-the-mill, and it means that the home sale is contingent upon the prospective buyer’s ability to obtain financing. With proof of mortgage loan approval from the buyer, the seller can break the purchase agreement without consequence.
- Appraisal Contingency
Obtaining a home appraisal is standard when purchasing a home, and an appraisal contingency puts the deal on hold until the appraisal results are in, and can either void the agreement or reopen selling price negotiations. If the home appraises for less than the initial agreed upon price, the buyer may ask the seller to lower the listing price to reflect its estimated value.
- Inspection Contingency
Along the same lines as the appraisal contingency, an inspection contingency allows for a home inspection before closing. If there are issues found with the home, the buyer may negotiate with the seller to make needed repairs before finalizing the sale.
- Title Contingency
Most buyers write a title contingency into the purchase agreement as protection if the property holds open liens. When the property has no issues with the title or “deed,” both parties can move forward and into the closing process. Otherwise, the buyer can terminate the agreement.
- Active-Kick Out
The Active-Kick Out contingency means that the contract is only valid if the buyer can sell their current home typically within a short, specified time frame. This condition allows the seller to continue showing the home but still gives the buyer priority, although they usually have to act quickly to avoid voiding the agreement.
- Active-First Right
Commonly known as a Right of Refusal, an Active-First Right listing is another type of contingency. This instance happens when the seller makes an agreement with the prospective buyer, giving the buyer the option of matching any subsequent offers made on the home. A buyer uses this type of contingency when they must sell their current home before closing on another.
Columbia Real Estate Home Buying Professionals
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